Toyota will launch a domestically produced plug-in hybrid in China before the year is over and will follow with EVs once certification is completed, said Dong Changzheng, executive vice president of Toyota Motor (China) Investment Co., to a small group of reporters at the Beijing Auto Show. The cars will be marketed under a yet to be announced “Chinese” brand.

Toyota had been one of the last holdouts after the Chinese government had strongly suggested that each joint venture creates a new brand with Chinese characteristics. Privately, executives at Toyota had questioned the wisdom  of these “sub-brands” as they are called in China. Allegedly, the idea behind these sub-brands is to make cars cheaper. My contacts convincingly argued that a new brand does not lower the price of the car. Investments in branding, dealerships, support  and management can raise the price of the car.

Not so with EVs. China will limit its generous subsidies not only to made-in-China PHVs and EVs, the cars also must be sold under a “Chinese” brand. This “Chinese” brand can be owned by a joint venture. Toyota bows to fiscal realities and will start a Chinese “sub-brand.”

“Or two,” quipped a Toyota executive at the show, in reference to Toyota’s two joint Chinese ventures. Toyota cooperates with FAW in the north and Guangzhou Auto in the south, and both will require separate sub-brands.

Toyota demonstrated its opening to Chinese ideas in the decoration of its booth at the Beijing Auto Show. The entrance to the VIP section looks like what I called “a Chinese KTV.”

“Or maybe a Chinese restaurant,” the helpful Toyota executive suggested.